Abstract:
To attract retail time deposits, over 7,000 FDIC insured U.S. commercial banks publicly post their yield offers.
I document a sizeable and pro-cyclical cross-sectional dispersion in these yields during the period 1997 - 2011,
revealing the presence of market power for this highly homogeneous financial product. The yields were also adjusted
sluggishly and asymmetrically in response to increasing or decreasing fed funds rate target regimes. I investigate
to what extent information (search) costs on the part of the investors in this market can explain the observed
pricing behavior. I build and estimate an asset pricing model with heterogeneous search cost investors. A large
fraction of high information cost uninformed investors and the exit of low information cost informed investors
rationalizes the observed price dispersion. I further qualitatively match the asymmetric yield rigidity within
the framework of costly consumer search without the need to impose menu costs or other restrictions on the banks'
repricing behavior.

Abstract:
We document that all large US bank holding companies have organizational
structures composed of a large number of individual subsidiaries with
different geographic or functional specialization. Moreover, and much
less known, the organizational structures across different holding companies
vary in their network characteristics. We combine information from
the organizational network structure of bank holding companies with data
from the balance sheets and income statements of the holding company bank
and non-bank subsidiaries to construct a unique dataset of the internal
allocation of funds within a conglomerate. We document that these internal
capital flows are sizeable and increase with the cost of external funding.
Further, banks within a conglomerate with higher centrality in the organizational
network receive disproportionally higher funding controlling for profitability
and investment opportunities. We also show that previous research on the internal
allocation of capital in banking, which did not control for the network structure
and the endogeneity of organizational structure of bank holding companies,
significantly underestimates the role of the internal capital markets.

Abstract:
A growing empirical literature documents that the quantity of privately held U.S. government debt affects the spreads
on a wide range of fixed-income securities through determining the convenience premium placed on assets with varying
degree of safety and liquidity. Shocks to the convenience premium, therefore, constitute an important source of disturbance
to banks' relative cost of funds across insured and non-insured deposits. To the extent that one questions the validity of
the aggregate correlations found in the literature, the liability side of FDIC insured commercial banks provides a unique
laboratory for testing the impact of the public supply of safe and liquid assets on determining asset prices and allocations.
Using a proprietary micro-level dataset of prices and quantities of insured and non-insured liabilities of the U.S. commercial banks,
I document the heterogeneous response of banks with different capital structure in the pricing and funding choices across the two
types of debt to changes in the level and maturity of government debt. The latter have larger impact on banks that have higher share
of insured sources of funding. Overall, an increase in the level of government debt and shortening of its maturity have
a contractionary effect on the banks' balance sheets pointing to a strong crowding out effect of government debt on the banking system
capacity to attract cheap sources of funding in the form of deposits and hence its ability to extend loans.

Abstract:
Deposit insurance schemes in many countries place a limit on the coverage of deposits in each bank.
However, no limits are placed on the number of accounts held with different banks. Therefore, under
limited deposit insurance, some consumers open accounts with different banks. We compare three regimes
of deposit insurance: No deposit insurance, unlimited deposit insurance, and limited deposit insurance.
We show that limited deposit insurance weakens competition among banks and reduces consumer welfare as
well as total welfare relative to no or unlimited deposit insurance.

Abstract:
To identify disruptions in credit markets, research on the role of
asset prices in economic fluctuations has focused on the information
content of various corporate credit spreads. We re-examine this
evidence using a broad array of credit spreads constructed directly
from the secondary bond prices on outstanding senior unsecured debt
issued by a large panel of nonfinancial firms. An advantage of our
``ground-up'' approach is that we are able to construct matched
portfolios of equity returns, which allows us to examine the
information content of bond spreads that is orthogonal to the
information contained in stock prices of the same set of firms, as
well as in macroeconomic variables measuring economic activity,
inflation, interest rates, and other financial indicators. Our
portfolio-based bond spreads contain substantial predictive power
for economic activity and outperform - especially at longer
horizons - standard default-risk indicators. Much of the predictive
power of bond spreads for economic activity is embedded in
securities issued by intermediate-risk rather than high-risk
firms. According to impulse responses from a structural
factor-augmented vector autoregression, unexpected increases in bond
spreads cause large and persistent contractions in economic
activity. Indeed, shocks emanating from the corporate bond market
account for more than 30 percent of the forecast error variance in
economic activity at the two-to four-year horizon. Overall, our
results imply that credit market shocks have contributed
significantly to U.S. economic fluctuations during the 1990--2008
period.

Abstract:
I study the role of costly search on part of consumers for generating sticky prices. I investigate the theory against
alternative models, such as menu cost models, using pricing data from retail deposit markets.

Abstract:
FDIC insured banks and money market mutual funds were considered competitors in the market
for safe and liquid assets. Contrary to this notion, the growing involvement of traditional
banks in the money market industry through advising, managing, and sponsoring of money market funds has
expanded banks' span of control in the market for money like instruments. This paper examines the
hypothesis that instead of entering into price competition for sophisticated investors,
banks use their expanded span of control over money funds to price discriminate across
less sophisticated investors who chose deposit products and more sophisticated investors
who are steered into money market mutual funds.This theory is tested with a unique dataset
of deposits and money market fund flows within and outside bank-money fund relationships.

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Disclaimer
The views expressed herein are those of the author and do not necessarily represent the offical position of the Board of Governors of the Federal Reserve System.